Business
L.A.’s defense industry is booming. Federal funding crunch could change that
When former Space X engineer Josh Giegel launched his North Hollywood tech company Gambit in 2023, he had a vision for the battlefield of the future, one with fewer soldiers and more AI-driven assets.
His software would allow unmanned tanks and swarms of armed drones to communicate and adapt in real time — without human intervention.
The company now employs more than a dozen people and has contracts with the military, which is testing his software. But its growth has been clouded because of a funding dispute on Capitol Hill over the Small Business Innovation Research (SBIR) program, which provides companies seed capital to develop new technology that can assist the government. Funding for it and related programs expired in September.
The seed fund has been vital to many local tech startups. Gambit received $3.3 million from the program early on and was hoping to get another $5 million of the Small Business Administration money, which is allocated by the military.
Workers at K2 Space in Torrance, where the startup is building high-capacity satellites for Medium Earth Orbit. (K2 Space)
(K2 Space)
“That funding really helps companies like ours that are putting tech into warfighters’ hands,” Giegel said. “Losing that money becomes more leg work to find other sources.”
Gambit’s predicament is widely shared across Southern California, which has experienced a proliferation of tech startups launched by SpaceX alumni and other entrepreneurs with the support of SBA money.
In 2024, 124 contracts worth $173 million were awarded to 71 California companies through SpaceWERX, an El Segundo-based arm of the Space Force that distributes SBA funding to innovative defense startups.
The money also is disbursed by other branches of the military and departments of the government, which do not take stakes in the companies. Gambit received funds through the Air Force.
Other local recipients of SBA funding include Costa Mesa autonomous weapons maker Anduril Industries, now valued at more than $30 billion; and satellite platform manufacturers K2 Space in Torrance and Apex Space in Los Angeles.
The funds are allocated in phases, with initial feasibility awards up to about $300,000 and as much as $2 million for the development of prototypes. A maximum of $15 million is available through a companion SBA-funded program if the companies can bring in other funding.
“I don’t know if I can name a single company that I work with, or that I know of, that did not start with SBIR” funding, said Maggie Gray, a partner at Silicon Valley venture capital firm Shield Capital, which invested in Apex. “We see SBIR as a crucial part of the defense-tech ecosystem. It’s kind of the way to get your initial foot in the door with the government.”
Established in 1982, the SBA program provides more than $4 billion to government departments, with the military receiving the lion’s share. But SBA funding ran out on Sept. 30 as lawmakers clashed over proposed reforms.
Sen. Joni Ernst (R-Iowa), who chairs the Senate Committee on Small Business and Entrepreneurship, introduced a bill that would set a $75-million lifetime cap on funds for individual companies and establish performance benchmarks. The bill also would beef up due diligence to prevent new technology falling into the hands of foreign adversaries and end diversity, equity and inclusion preferences in funds distribution.
The legislation, however, has faced stiff opposition from Massachusetts Sen. Ed Markey, the ranking Democrat on the committee, who contends the reforms go overboard and would crimp innovation. A bipartisan House bill that would have reauthorized SBA funding for a year failed in the Senate amid opposition by Ernst, who is leaving Congress in a year.
While negotiations have restarted on Capitol Hill, there is no guarantee SBA financing will be restored, though the military and other government agencies could fund startups through their own budgets.
The SpaceWERX program, which has played a critical role in Southern California’s resurgent space economy, was established in 2020, just one year after the Space Force was founded.
Director Arthur Grijalva said the program distributes several hundred million dollars in SBA funding annually across the nation and has not had an issue with foreign influence or companies receiving repeat awards without much to show for it.
“Even though it might be small [funding] for a really big company, it’s really impactful for these small companies, these startups, where if they don’t have this funding, they might have to do layoffs, they might have to go into debt, or they might ultimately not be successful,” Grijalva said.
Since September, $94 million in larger contracts has been held up for more than 25 companies, which follow funding for feasibility studies and prototypes, according to SpaceWERX.
The impasse comes at an inopportune time for the Trump administration, which has been overhauling weapons procurement as China modernizes and builds up its military.
Secretary of Defense Pete Hegseth announced in November a policy to speed up weapons development by first finding capabilities in the commercial market before the government attempts to develop new systems. This month he visited several L.A.-area defense companies, including Torrance startup Castelion, a manufacture of hypersonic missiles that received SBIR funding.
Kirsten Bartok Touw, managing partner of New Vista Capital, which invested in Castelion, agreed the program may have flaws but said it plays an invaluable role in attracting venture capital to companies that have drawn the funding.
“That is an important signal to the market, which says, ‘You should invest in more of these, because this is a technology we want and need,’” she said.
A report this month by the National Academies of Sciences, Engineering and Medicine found that one dollar of the funding distributed by the military attracts more than four dollars of venture capital or other third-party investment.
Markey’s office said last week he submitted a proposal to Ernst that includes making the SBIR program permanent, increased allocations, a performance metric, foreign due diligence standards and fellowships for underserved small businesses, among other provisions.
“This bill is [his] second attempt at breaking the logjam and restarting these critical programs to ensure America’s most nimble allies — small businesses — are not decimated,” a Markey spokesperson said.
A spokesperson for Ernst said last week that the senator “remains focused on ensuring taxpayer investments in R&D do not benefit China and actually deliver cutting-edge technology for our warfighters.”
Giegel said that while he is optimistic future SBA funding might come through for Gambit, he is not counting on it. He now assumes he will have to look for other sources of money to grow the company, which already attracted undisclosed venture capital.
“We’re trying to find operational relevance faster,” he said.
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Politicians in Washington and the reporters who cover them have an often adversarial relationship.
But on the last Saturday in April, they gather for an irreverent celebration of press freedom and the First Amendment at the Washington Hilton Hotel: The White House Correspondents’ Association dinner.
Hosted by the association, an organization that helps ensure access for media outlets covering the presidency, the dinner attracts Hollywood stars; politicians from both parties; and representatives of more than 100 networks, newspapers, magazines and wire services.
While The Times will have two reporters in the ballroom covering the event, the company no longer buys seats at the party, said Richard W. Stevenson, the Washington bureau chief. The decision goes back almost two decades; the last dinner The Times attended as an organization was in 2007.
“We made a judgment back then that the event had become too celebrity-focused and was undercutting our need to demonstrate to readers that we always seek to maintain a proper distance from the people we cover, many of whom attend as guests,” he said.
It’s a decision, he added, that “we have stuck by through both Republican and Democratic administrations, although we support the work of the White House Correspondents’ Association.”
Susan Wessling, The Times’s Standards editor, said the policy is a product of the organization’s desire to maintain editorial independence.
“We don’t want to leave readers with any questions about our independence and credibility by seeming to be overly friendly with people whose words and actions we need to report on,” she said.
The celebrity mentalist Oz Pearlman is headlining the evening, in lieu of the usual comedy set by the likes of Stephen Colbert and Hasan Minhaj, but all eyes will be on President Trump, who will make his first appearance at the dinner as president.
Mr. Trump has boycotted the event since 2011, when he was the butt of punchlines delivered by President Barack Obama and the talk show host Seth Meyers mocking his hair, his reality TV show and his preoccupation with the “birther” movement.
Last month, though, Mr. Trump, who has a contentious relationship with the media, announced his intention to attend this year’s dinner, where he will speak to a room full of the same reporters he often derides as “enemies of the people.”
Times reporters will be there to document the highs, the lows and the reactions in the room. A reporter for the Styles desk has also been assigned to cover the robust roster of after-parties around Washington.
Some off-duty reporters from The Times will also be present at this late-night circuit, though everyone remains cognizant of their roles, said Patrick Healy, The Times’s assistant managing editor for Standards and Trust.
“If they’re reporting, there’s a notebook or recorder out as usual,” he said. “If they’re not, they’re pros who know they’re always identifiable as Times journalists.”
For most of The Times’s reporters and editors, though, the evening will be experienced from home.
“The rest of us will be able to follow the coverage,” Mr. Stevenson said, “without having to don our tuxes or gowns.”
A former female staffer who worked for Beast Industries, the media venture behind the popular YouTube channel MrBeast, is suing the company, alleging she was sexually harassed and fired shortly after she returned from maternity leave.
The employee, Lorrayne Mavromatis, a Brazilian-born social media professional, alleges in a lawsuit she was subjected to sexual harassment by the company’s management and demoted after she complained about her treatment. She said she was urged to join a conference call while in labor and expected to work during her maternity leave in violation of the Family and Medical Leave Act, according to the federal complaint filed Wednesday in the U.S. District Court for the Eastern District of North Carolina.
“This clout-chasing complaint is built on deliberate misrepresentations and categorically false statements, and we have the receipts to prove it. There is extensive evidence — including Slack and WhatsApp messages, company documents, and witness testimony — that unequivocally refutes her claims. We will not submit to opportunistic lawyers looking to manufacture a payday from us,” Gaude Paez, a Beast Industries spokesperson, said in a statement.
Jimmy Donaldson, 27, began MrBeast as a teen gaming channel that soon exploded into a media company worth an estimated $5 billion, with 500 employees and 450 million subscribers who watch its games, stunts and giveaways.
Mavromatis, who was hired in 2022 as its head of Instagram, described a pervasive climate of discrimination and harassment, according to the lawsuit.
In her complaint, she alleges the company’s former CEO James Warren made her meet him at his home for one-on-one meetings while he commented on her looks and dismissed her complaints about a male client’s unwanted advances, telling her “she should be honored that the client was hitting on her.”
When Mavromatis asked Warren why MrBeast, Donaldson, would not work with her, she was told that “she is a beautiful woman and her appearance had a certain sexual effect on Jimmy,” and, “Let’s just say that when you’re around and he goes to the restroom, he’s not actually using the restroom.”
Paez refuted the claim.
“That’s ridiculous. This is an allegation fabricated for the sole purpose of sparking headlines,” Paez said.
Mavromatis said she endured a slate of other indignities such as being told by Donaldson that she “would only participate in her video shoot if she brought him a beer.”
“In this male-centric workplace, Plaintiff, one of the few women in a high-level role, was excluded from otherwise all-male meetings, demeaned in front of colleagues, harassed, and suffered from males be given preferential treatment in employment decisions,” states the complaint.
When Mavromatis raised a question during a staff meeting with her team, she said a male colleague told her to “shut up” or “stop talking.”
At MrBeast headquarters in Greenville, N.C., she said male executives mocked female contestants participating in BeastGames, “who complained they did not have access to feminine hygiene products and clean underwear while participating in the show.”
In November 2023, Mavromatis formally complained about “the sexually inappropriate encounters and harassment, and demeaning and hostile work environment she and other female employees had been living and experiencing working at MrBeast,” to the company’s then head of human resources, Sue Parisher, who is also Donaldson’s mother, according to the suit.
In her complaint, Mavromatis said Beast Industries did not have a method or process for employees to report such issues either anonymously or to a third party, rather employees were expected to follow the company’s handbook, “How to Succeed In MrBeast Production.”
In it, employees were instructed that, “It’s okay for the boys to be childish,” “if talent wants to draw a dick on the white board in the video or do something stupid, let them” and “No does not mean no,” according to the complaint.
Mavromatis alleges that she was demoted and then fired.
Paez said that Mavromatis’s role was eliminated as part of a reorganization of an underperforming group within Beast Industries and that she was made aware of this.
Lululemon, the yoga pants and athletic clothing company, has hired a former executive from a rival, Nike, as its new chief executive.
Heidi O’Neill, who spent more than 25 years at Nike, will take the reins and join Lululemon’s board of directors on Sept. 8, the company announced on Wednesday.
The leadership change is happening during a tumultuous time for Lululemon, which had grown to $11 billion in revenue by persuading shoppers to ditch their jeans and slacks for stretchy leggings. But lately, sales have declined in North America amid intense competition and shifting fashion trends, with consumers favoring looser styles rather than the form-fitting silhouettes for which Lululemon is best known.
“As I step into the C.E.O. role in September, my job will be to build on that foundation — to accelerate product breakthroughs, deepen the brand’s cultural relevance, and unlock growth in markets around the world,” Ms. O’Neill, 61, said in a statement.
Lululemon, based in Vancouver, British Columbia, has also been entangled in a corporate power struggle over the company’s future. Its billionaire founder, Chip Wilson, has feuded with the board, nominated independent directors and criticized executives.
Lululemon’s previous chief executive, Calvin McDonald, stepped down at the end of January as pressure mounted from Mr. Wilson and some investors. One activist investor, Elliott Investment Management, had pushed its own chief executive candidate, who was not selected.
The interim co-chiefs, Meghan Frank and André Maestrini, will lead the company until Ms. O’Neill’s arrival, when they are expected to return to other senior roles. The pair had outlined a plan to revive sales at Lululemon, promising to invest in stores, save more money and speed up product development.
“We start the year with a real plan, with real strategies,” Mr. Maestrini said in an interview this year. “We make sure decisions are made fast.”
Lululemon said last month that it would add Chip Bergh, the former chief executive of Levi Strauss, to its board to replace David Mussafer, the chairman of the private equity firm Advent International, whom Mr. Wilson had sought to remove.
Ms. O’Neill climbed the organizational chart at Nike for decades, working across divisions including consumer sports, product innovation and brand marketing, and was most recently its president of consumer, product and brand. She left Nike last year amid a shake-up of senior management that led to the elimination of her role.
Analysts said Ms. O’Neill would be expected to find ways to energize Lululemon’s business and reset the company’s culture in order to improve performance.
“O’Neill is her own person who will come with an agenda of change,” said Neil Saunders, the managing director of GlobalData, a data analytics and consulting company. “The task ahead is a significant one, but it can be undertaken from a position of relative stability.”
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